Don Devost

Hi Dave, I think what you are trying to find in a target date fund runs contrary to the very reason these were created, which is to provide investors with a simple one-stop investment that evolves over time in a fairly predictable way. Indeed, I don't think any fund that was as actively managed as you suggest would make it as a qualified default investment alternative in a retirement plan, which would limit its marketability greatly. So I don't expect you to find such a fund.

All of the TDFs I am aware of are funds of funds, meaning the degree to which they are active is limited by the degree to which the underlying funds are themselves active. The best of the TDF series in my opinion are Vanguard and T. Rowe Price. Vanguard employs only index funds and, as a result, has rock bottom expenses (< 20 bps) whereas T. Rowe Price funds will be almost all actively managed and have higher expenses (~ 73 bps). But the asset allocations to each of those funds is NOT actively managed to the extent you desire.

You could consider a "balanced fund" that is actively managed and suits your overall risk profile. The upside of these is that they invest across all asset classes and could be a one-stop investment for you - for a time. The downside is that their allocations don't naturally become more conservative over time. This means every 5 to 10 years you might be searching for a new, more conservative investment. But your only other alternative is to put your money with an investment manager, which may not be a bad idea if you have enough assets.

Hi Willis, I am going to answer your question before providing the requisite cautionary advice about the strategy you are pursuing. To identify sector leaders, I would look at the composition of the SPDR sector ETFs, which pull companies from the S&P 500 index based on sector and weight them by market cap. XLF, for example, is the Financials ETF. Using Morningstar or SPDR's own website, you can easily see the top components of the ETF. In the case of XLF they include Wells Fargo and JPMorgan Chase. The ability to identify the strongest or weakest companies is part of the caution I would apply. There are relatively few people who can do that on a consistent basis, and their names include Warren Buffett and Peter Lynch, and they all definitely made investing their full time business and had teams of talented people helping them. Assuming you don't fit that mold, and you still want to pursue sector rotation, then let me add the following bit of caution. The strategy you are considering is already being pursued by countless thousands of investors, including some of the largest mutual and hedge funds. That means there are likely no excess profits to be made from doing the same thing. And your likelihood of outperforming them, after fees and transaction costs, is pretty low. Nonetheless, I wish you luck with your investments.

I agree with George that a fee-only advisor in your area is a great place to start. Look for someone who focuses on small company retirement plans. This individual should also help you decide whether a 401(k) or SIMPLE IRA is right for your company.

In the 401(k) space, I have evaluated a number of platforms and the most friendly to start-up plan budgets that still provide quality investment menus and service include Employee Fiduciary, Sharebuilder 401(k), TD Ameritrade, 401k-Direct, and T. Rowe Price. I'm sure this isn't an exhaustive list but browsing these sites may help you understand the marketplace better and learn what constitutes a good platform.